MOSCOW, December 5The effectiveness of oil sanctions against Russia is reduced due to a decrease in the discount of Urals to the global benchmark Brent, experts from the independent research organization Center for Research on Energy and Clean Air (CREA), registered in Finland, write in their report.
Exactly a year ago, on December 5, 2022, oil sanctions by Western countries against Russia came into force. The European Union stopped accepting Russian oil transported by sea, and the G7 countries, Australia and the EU introduced a price limit for oil transport by sea at $60 per barrel — it is prohibited to transport and insure more expensive oil. In response, Russian President Vladimir Putin by his decree prohibited Russian companies from selling oil under contracts that directly or indirectly provide for a price ceiling.
“Price restrictions had an impact, but did not live up to their potential,” CREA experts write in a report on oil sanctions against the Russian Federation.
“The difference in prices between Russian oil and the world benchmark oil has been steadily decreasing since the beginning of 2023, indicating a decrease in the effectiveness of sanctions,” the report notes.
According to the Russian Ministry of Finance, in January the main export grade Urals was trading below $50 per barrel. At the same time, Brent cost about $80. But already in February, Russian oil prices began to gradually recover. In November, Russian oil was already sold at $72.84 per barrel, while Brent price was $83.12, the discount decreased to $10.28. At the same time, the Ministry of Finance also reported that in January-October 2023, oil and gas revenues of the Russian budget decreased by 26.3%, to 7.21 trillion rubles.
«The EU ban on Russian oil and G7 price caps cost Russia approximately €34 billion in lost oil export revenues, resulting in a 14% decline in export revenues during the first year of action sanctions. The sanctions worked mainly due to the reduction in prices for Russian oil compared to world prices,» Finnish experts write.
According to the report, the declining impact of sanctions is due to the failure of G7 and EU governments to enforce and strengthen price ceilings, which has enabled Russia to sell oil above the cap, increasing supplies to new buyers.